Panels give limited support to tax plan

Robey wants to increase levies on home sales to pay for more schools

January 23, 2003|By Larry Carson | Larry Carson,SUN STAFF

After a hard push from housing director Leonard S. Vaughan, Howard County's separate housing board and commission agreed yesterday to provide limited support to the Robey administration in its effort to increase real estate transfer taxes to build more schools.

Robey is urging Howard's 11 state legislators to approve a transfer tax increase from 1 to 1.5 percent, producing $10 million a year that could be used to borrow $215 million over eight years. The extra revenue would be dedicated to paying off the bonds sold. The money would be used exclusively for schools, Robey has promised, though it would free other county bond funds for general government projects.

With a legislative hearing on the proposal set for Feb. 6 in Ellicott City, County Executive James N. Robey and members of his administration are seeking support for his proposal from business and community leaders.

Prompted by Vaughan, the Housing and Community development Board agreed by a 3-2 vote to endorse Robey's plan.

The Housing Commission agreed by a similarly narrow vote, 2-1, to testify at the hearing that the tax increase won't hurt affordable housing, which some critics have said it would. But a majority of the commission members indicated they were opposed to Robey's plan. The Housing and Community Development Board makes county housing policy, and the commission operates public housing and rent subsidy programs.

The transfer tax issue was not on the agenda of the joint board and commission meeting Tuesday night , but Vaughan asked for a consensus, arguing strongly for the executive's plan.

Robey has argued that the transfer tax, though it increases the cost of buying a home, hits exactly the transactions that are producing more county schoolchildren, which in turn is forcing construction of more buildings. In addition, with the state requirement for all-day kindergarten by 2007, up to 80 new classrooms will be needed.

County real estate agents oppose the tax increase because it would make buying a house more expensive, and they say it would hinder affordable housing. Vaughan disagreed.

"I personally believe this a very sound approach to solving the problems of affordable housing," Vaughan told the joint meeting. He noted that anyone buying a home for less than $180,000 can receive help in paying closing costs from the county's Settlement Down Payment Loan Program. If the tax is increased, a $180,000 house would cost $900 more at closing. The tax is often shared between buyer and seller.

"I find it interesting that we have so much support among the real estate industry for affordable housing," Vaughan said with apparent irony.

Average home prices in Howard County have soared to about $275,000, and last year's state reassessment of Ellicott City, Elkridge and east Columbia showed home values up an average of 29 percent.

Vaughan argued that the real estate industry has profited from the boom in Howard's home prices, which is partly driven by the county's highly rated school system. Revenue from the tax increase would bolster the county's desirability, he said.

But if the county adopted an impact fee, for example, "it would be so high it would have a significant" effect on all home purchases and would have a much worse effect on middle income buyers than a transfer tax increase would, Vaughan said.

And if the schools become crowded, the county's Adequate Public Facilities Ordinance would construction of homes, including affordable units, he said.

Vaughan said the chances for a general tax increase next year are nil, leaving the transfer tax as the least offensive option.

Housing Commission Chairman Kevin J. Kelehan appeared to agree.

"If you're going to have something [a tax increase], it's the most direct way to tie it to what's crowding the schools." But he would agree only to support a position that the transfer tax increase would not hurt affordable housing. He did not support the Robey tax increase.

Although most county officials have given up hoping for a school enrollment decline, Deborah Tolson, a Housing and Community Development board member, said it was her impression that school enrollments will decline later this decade and that the county could be stuck with "white elephant" buildings that are underused. She voted against supporting the tax plan.

Peter Morgan and Clarence Toomer, both commission members who work in real estate, also opposed the transfer tax idea, noting that Maryland's closing costs are already among the most expensive in the nation.

"Why not share the burden equally?" Morgan asked, referring to a general income or property tax increase to benefit schools.

Vaughan answered that with a question of his own.

"What are the prospects of getting a property tax increase? Who is going to vote for it? How many [tax increase options] are politically viable?" Vaughan said.

"I don't think it's `do we deal with it'. It's how we deal with it," Vaughan said, adding that the tax increase would be an "investment" in schools.

Robert Brownell, chairman of the housing board, said he saw no negative effect on affordable housing from the tax increase, but he voted against supporting Robey's proposal because he opposes narrowly aimed specialty taxes, he said.